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Tanzania: Experts Caution Too Much Austerity May Hurt Growth

Too much austerity measures may derail the effort to collect more taxes and could result in long-term damage to growth, financial experts have cautioned.

Financial experts cautioned the government needed to tread carefully so as to balance austerity and growth arguing that the less the government spends, the less should be expected on economic growth and development as expenditure is one of the key variables on growth equation.

The KPMG Senior Manager, Tax Services, Mr Nsanyiwa Donald, said discipline in expenditure is a good thing but cost cutting measures should be looked into with a second eye as they may be hurting the economy. ‘The government should avoid too much austerity measures,” Mr Donald told stakeholders during KPMG 2016/17 Budget Cocktail held in Dar es Salaam to discuss the budget announced in Dodoma last week.

In 2016/17 the government has focused expenditure on infrastructure development and industrialization. “The reduction of unnecessary expenditure is good… but not too much austerity,” Mr Donald said. Mzumbe University, economist Prof Honest Ngowi said broadly speaking the 2016/17 financial plan was austerity budget which may hamper growth.

“Too much of austerity measures reduces growth and is bad measure for the economic growth,” Prof Ngowi, who was one of the speaker at KPMG Budget Cocktail, said. He said proposal to restrict government advertisements to state owned media and holding of seminars in house boardrooms was a bad move for the economy diversification.

Mr Donald and Prof Ngowi however agreed that the financial plan was good as it centered on solving citizen’s concerns and industrialisation. Prof Ngowi said industrialisation was not a new policy in the country as it was there between 1970s and 1980s but poor policies affected its growth.

“The business of the government should not be doing business rather create conducive environment for the business to flourish,” Prof Ngowi said. The economist also said that the current pace of improving infrastructure was positive mode but investors want policy and political predictability.

If investors failed to see predictability in a long term we may see decline in investments,” Prof Ngowi said. While Mr Donald said “on review of none performing privatised industries the government should not run them… (also) should not run funds set aside for farms/livestock for industrial raw material.”

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